Transcript OPPORTUNITIES AVAILABLE – WHAT NEEDS TO BE DONE?

OPPORTUNITIES AVAILABLE – WHAT
NEEDS TO BE DONE?
Encouraging Young People into Farming
4th March 2009
Introduction
• “Not in Kansas anymore”
• Economic growth has come to an abrupt halt – increases in
unemployment, job uncertainty, emigration
• Young people – no experience of recession
• Opportunities for young farmers?
• Need to first look at current situation for Irish agriculture
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Agriculture and the Irish Economy
• Numbers working in agriculture have declined - 128,000 family
farms in 2007 from 170,600 in 1991
• Still an important generator of employment and indigenous
wealth
• Agri-food accounts for over 50% of exports from Irish owned
manufacturing
• Farming, food and related services provide 300,000 jobs or
more than 20% of employment outside Dublin
• Low profit outflow and low import requirements
• Contributes to balanced regional and community development
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Agriculture during and after the
Celtic Tiger
• Attraction of farming as a career suffered due to easily
available alternative employment in construction
• Numbers in construction doubled in less than a decade,
280,000 in 2007 – fell 22% in 2008
• Other driver of economic growth was consumer spending,
largely driven by borrowing – this has fallen significantly,
with deflation, or falling prices in early 2009
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Agriculture during and after the
Celtic Tiger
• Choosing farming as a career option is now more attractive
– challenge is to ensure that career is sustainable
throughout economic cycles
• Young farmer is self-employed and in more control of
his/her own career path
• Policymakers must realise that Ireland is a small-open
economy and economic recovery will be driven by export
sectors, including agri-food
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Outline of Presentation
• Provide Initial Overview of Structure of the sector – need
to know from where we are starting out
• Highlight key incentives and schemes currently in place to
encourage young farmers, and the opportunities these
provide
• Identify shortfalls in schemes and suggested other
desirable measures
• Focus on two specific sectors – dairying and biomass crops
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Structure of Sector – Age profile
• An ageing sector
• Majority of farmers aged over 55 – 50.5% of
farming population in 2007, up from 39.5% in
2000
• Approximately 9,000 farmers, or only 7% of
farming population aged under 35, down from
13% in 2000
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Structure of Sector - Farm Structure
• Average farm size increased by 25% between 1991 and
2007, up to 32.3 ha
• Mobility in land use has increased – 33% of all farms
renting over 750,000 ha in 2007
• Farm fragmentation still an issue – 3.5 land parcels per
farm
• High price of agricultural land in last decade, particularly
relative to income that can be generated – but fell 16.1% in
2008
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Enrolment in Agricultural
Colleges
• Increase in demand for agricultural courses at further and
higher education level
• Dramatic increase in enrolments in Teagasc agricultural
courses – 621 students in 2008, up from 298 in 2006
• Points increases in higher education courses – Bachelor of
Agricultural Science increase from 315 to 375 between
2007 and 2008
• Contrast with fall in demand of over 30% for courses in
the Built Environment
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Where to now?
• Agriculture in Ireland is at a crossroads
• Unfavourable age-profile and farm fragmentation
• Increasing numbers in agricultural courses
• Economic recovery dependent on competitive export
sector
• Farming needs new blood, with well trained new entrants
enabled to drive a market-led farming sector
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Farm Inheritance and the CAP
• Almost 100% of new entrants enter through inheritance
• Access to land often provides the greatest constraint –
quantity and quality
• Type of farming enterprise inherited
• Common Agricultural Policy – Payments decoupled from
production
• May delay withdrawal from farming or reduce land
mobility
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Policy instruments
General
• Taxation system has been amended to encourage land
consolidation and transfer
• Specific reliefs for young farmers
Long Term Leasing
• Annual Income tax exemptions of up to €20,000 for
landowners who lease out land for long periods
• Leased land also eligible for Capital Gains Tax Retirement
Relief
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Policy instruments – Stamp and
Stocking Relief
Stamp Duty Relief
• Full relief for young trained farmers for transfers of land
and farm buildings
• Relief for all farmers for land purchased for purpose of
consolidation
Stocking Relief
• 100% relief for young farmers expanding their herd size
• Farmer can offset increases in value of stock against tax
liability
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Policy Instruments – Capital Taxes
Capital Acquisition Tax
• Applies to recipient of property
• Agricultural relief reduces market value of agricultural
property by 90%, thereby increasing relief threshold
Capital Gains Tax
• Charged on any profit made on disposal of land – 22% rate
• Major barrier to farm consolidation and land transfer
• Proposal – CGT Relief if proceeds from sale of land are
used to acquire other land for farm consolidation
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Policy Instruments – Grant Aid
Installation Aid and Early Retirement
• Installation Aid used to offset establishment costs, or used as
working capital
• Early Retirement Scheme provides pension for retiring farmers
aged over 55
Budget 2009
• Suspension of applications to schemes
• Incredibly negative decision
• Exchequer Funding is limited - Priority must still be given to
schemes that encourage innovation and restructuring in
productive industries
• Decision to suspend applications must be reversed
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Policy Instruments - Partnerships
• Formal Agreement between two or more people to farm
together and share profit
• New entrant/parent partnerships - 450 partnerships in
operation in dairy sector
• Disincentives exist - Benefits of partnership are lost
through loss of individual rights
• Maximum allowances for partnership same as for single
farmers - Installation Aid, On-farm Investment Schemes,
DA Payments, Modulation-exempt threshold
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• Need to address this – other country examples, e.g. France
No man is an Island
Accessing and Using Support Services
• Interaction with other farmers is important, both from a
social and business perspective
• Need to access advisory services, such as Teagasc – 3C
discussion groups, farm visits, assistance with application
forms
• Importance of membership of organisations such as Macra
and IFA for social contact and discussion of farming issues
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Accessing and Using Support Services
• I-Farm Initiative – facilitates farm to farm trading and is a
portal for accessing required farm services
• IFA Skillnet – assist farmers with efficient management of
their business
• Role of technology will be of increasing importance - need
for roll out of National Broadband Scheme
• Services go beyond monetary support measures –
challenge for young farmer, farming organisations and
advisory services to develop strong relationships
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Dairy Farming
• Market-based, full-time farming career option
• Milk Quota regime provides priority access at a lower
price to young farmers
• Abolition of milk quota will provide opportunities to
expand
• Challenges will include
– Production at a scale and cost-base competitive enough
to withstand volatility in milk prices
– Capacity of processing sector to process increased
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volumes
Biomass Crops
• Increasing role of biomass crops in generating renewable energy
and reducing emissions – particularly heat energy
• Forestry is largest biomass resource in the country – 300,000
hectares under farmer management
• 2,000 hectares of Willow and Miscanthus planted under
Bioenergy Scheme
• Currently not viewed as an integral part of farm system - often
planted on marginal land
• 20 year tax free income, of up to €760 per hectare but
Replanting obligation a disincentive
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Biomass Crops
• Government must create a market for these products
• IFA Proposal - Biomass Public Procurement Initiative –
convert 25% of all public buildings to biomass heating
systems
• Potential to reduce public sector annual heating costs by
€100 million
• A supporting environment that enables income generation
will incentivise young farmers to diversify
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Conclusion
Economy
• Downturn in Irish economy – difficult for any enterprise starting
out
• Access to working capital is constrained and incentive schemes
have been suspended
International decisions
• Size and structure of CAP post-2013 unknown – need to ensure
food security and maintain family-farm structure
• Agreement on WTO deal will affect structure and viability of
Irish agriculture – particular implications for beef, sheep and
dairy
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Conclusion
• Farming is attractive as a long-term career choice
• Technological advances and developments in different
farm sectors will provide their own opportunities
Finally – Opportunities from Adversity
– Pork product recall – consumer demand for accurate Country of
Origin labelling
– Commitment by Government to extend labelling to pigmeat,
poultry and lamb sectors
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Thank You
Questions?